As we’ve seen throughout the past year or so, the Democrats and the Republicans are singing two fairly different tunes.

Malloy, a Democrat, touted his achievements of balancing the budget without cutting town aid and growing the state’s economy and jobs, as well as his focus on education and pension reform.

House Minority Leader (and Republican) Larry Cafero, however, pointed out that the Office of Fiscal Analysis has recently issued reports stating the current budget is actually $145 million in deficit and the cost savings from the unions’ concessions last summer are not nearly as large as projected, among other troubling news.

Read the Connecticut Mirror‘s tale of two economies, and let us know which side you’re more in agreement with. Are you pleased and optimistic, or still worried?

What happened last year, and where will Connecticut go in the next year?

The address focused heavily on education reform and jobs, although Malloy did make one bold fiscal statement:

“Yes, we will have to cut some spending and forego some things we wanted to do over the course of the next few months, but make no mistake about it: we will end this year in the black.”

In case you missed it, you can read the full text here.

Whales and whalers?

No, New London is not resuming its historical role as a center of the whaling industry, though the sperm whale does maintain its designation as Connecticut’s official state animal. Today’s whales and whalers are fans of our professional hockey teams.

Many citizens of the Nutmeg State pine for the days of the Hartford Whalers, who played in the National Hockey League (NHL) until moving to North Carolina in 1997. As recently as last month, Governor Malloy was asked whether he could persuade the NHL to place a new team in the Capitol City.

Some Nutmeggers are even aware that the NHL’s New York Rangers franchise, which plays in Hartford today, is named the Connecticut Whale in honor of the state’s seafaring heritage. Many commentators have speculated that the name was also chosen to catch the attention of hockey fans who followed the original NHL franchise.

But few are aware that a new team has now begun its second season in the fledgling Federal Hockey League! The Danbury Whalers are battling foes from Brooklyn, Cape Cod, The 1,000 Islands, and four other regions for the coveted Commissioner’s Cup.

Unlike John Rowland, who focused heavily on luring the football Patriots to Hartford, Governor Malloy does not appear to be eager to invest government funds in professional sports. But considering his willingness to spend millions on projects like nanotechnology centers, might he consider allocating a few economic development dollars for our whales and whalers too?

Contributed by Michael Kraten, PhD, CPA, Accounting Professor at Providence College and President of Enterprise Mgt. Corp. http://aqpq.org

The figures include the pension concessions as well as the boost provided by a rebounding stock market.

Read the full story from The Connecticut Mirror.

According to the Wall Street Journal, Malloy proposed “increasing the state’s annual contributions by about $123 million a year to about $1.059 billion, fully funding the pension system in 20 years.”

The pension system, one of the most underfunded public pension funds in the country,  has historically been a big problem for Connecticut.

Read more about Malloy’s plan.  

This big news actually preceded some MORE big news for Connecticut’s fiscal situation: more budget cuts that will reportedly cut the budget gap.

It’s nice to see some of the larger “elephants in the room” being addressed. Do these two pieces of the puzzle make you breathe a little easier about Connecticut’s fiscal health? Is Malloy’s pension plan a plausible one?

(In a bit of good news, though, the rating outlook was changed from negative to stable!)

OPM Secretary Ben Barnes released the following statement in reaction to this news:

“Moody’s is wrong in its analysis of the state’s finances, and wrong to change Connecticut’s credit rating.  Connecticut has done all the right things to shore up our finances, and Moody’s has responded with a downgrade intended to satisfy their internal corporate need to deflect attention from their historic lack of credibility.

Connecticut has always paid its debt, and remains an attractive issuer of public debt.  Investors appreciate Connecticut’s strong income levels, conservative debt management practices, and fiscally conservative leadership.

Moody’s lowered the rating for Connecticut below where it has been since April 2010 even though Connecticut’s fiscal health has significantly improved during that period.  Recall that in 2010 Connecticut faced looming multi-billion deficits into the future, had pension funding ratios in the low 40s, had spent the entire rainy day fund, and was in the middle of a series of budgetary gimmicks which Governor Malloy has spent his first year in office undoing.

Today, we have a structurally balanced budget, have converted to GAAP, have fully funded our current pension obligations and seen their funding ratio rise, have negotiated significant pension benefit concessions from organized labor, have negotiated significant employee contributions to retiree health benefits, and have begun to add jobs to the state economy.

Moody’s Investor Service decision today to lower their rating of Connecticut’s General Obligation debt from Aa2 (negative) to Aa3 (stable) is unfortunate.  It reflects their continued reaction to their central involvement in the financial scandals that led to the deepest recession since the Great Depression.   Coming on the eve of our budget release, without an imminent bond sale, suggests that the move is motivated by factors other than Connecticut’s creditworthiness.

Moody’s, which receives approximately $170,000 per year in fees from the State for their bond rating services, is one of three agencies that rate Connecticut debt.  The others, Standard & Poor’s and Fitch, continue to rate Connecticut debt as AA (equivalent to Aa2 from Moody’s.)”

What do you think? Was Moody’s decision justified, particularly in light of Barnes’ comment that the rating from Standard & Poor’s and Fitch has not changed?

Op-Ed: With Tax Increases, How Can Connecticut Be Out of Cash?

Rep. Vincent Candelora, R-North Branford

Groundhog day came a bit early at the state Capitol. The latest release of the Treasurer’s cash flow report showed that the state’s operating cash fell below zero, thus requiring the Treasurer to temporarily borrow from the state’s bond proceeds in order to continue to pay the bills. While this practice is an appropriate exercise of the Treasurer’s authority, it raises a red flag and certainly merits a discussion on why this happened.

When our check book balance drops below zero, Connecticut has the ability to use money from our capital account, namely bond proceeds earmarked for capitol projects, for operating cost. While this system creates efficiencies for our cash management, it certainly hides the fact when we run out of operating revenue. Two years ago, I sponsored legislation that requires the Treasurer, on a monthly basis, to report our bond indebtedness and cash flow to the legislature. Knowing and understanding the cash flow of any entity is critical to its overall health. Each year we go through great pains to have a balanced budget, but that’s only part of the equation. Knowing how much money is in our check book to pay our bills is just as important.

According to the Treasurer’s January report, we ran out of operating revenue in December and had to borrow from our bond funds to keep our lights on. The Treasurer claimed that during the months of November and December the common cash pool declined “consistent with seasonal patterns,” thus necessitating a temporary transfer of money from our bond proceeds. When challenged with the explanation, both the Treasurer and Governor’s offices failed to give an explanation for this occurrence. Rather, the Treasurer acknowledged that these type of transfers are rare, occurring once in 2009 and in 2003.

I am troubled by this transfer, however, given the timing. In 2009 and 2003, Connecticut ran out of cash subsequent to crashes in the stock market. When the market crashes, less tax revenue comes into the coffers so it makes sense that we didn’t have the money to pay our bills. No such incident occurred in November or December that would justify this temporary transfer. In fact, reports continue to indicate that the economy is on the upswing and state revenues are meeting projections. After raising $1.5 billion in new taxes, it defies logic that we would be running out of cash. I fear that one explanation may be that Connecticut is not achieving the savings projected in its current year budget. To that end, the legislature must work on creating more transparency in the executive branch’s reporting of lapses, savings, and expenditures so that we are not met with any more surprises.

State Rep. Vincent Candelora represents the 86th district which includes North Branford, East Haven, and Wallingford.

Post contributed by Paula Hiltz, Controller of Smith Brothers Insurance, Inc. and a member of the CSCPA Governmental Issues Taskforce.

The Thomaston Opera House, for instance, was forced to shutter its nonprofit theatre program in 2010 after many decades of performances. But the community spent 2011 pulling together a new management team, and last week the town approved the return of the thespian community to the great stage!

Most striking, perhaps, was the relatively modest size of the funding package that was required to relaunch the theatre program. Apparently, only $15,000 was required to serve as a backstop funding resource for the $1,250 monthly facility rental cost. The Thomaston Savings Bank provided the funds in the form of a grant.

Other historic theaters are waiting in the wings as well, searching for funds to relaunch operating activities. Derby’s Sterling Opera House requires an estimated $3 million to $4 million to finance renovations, and Stratford legislators have estimated that the town’s Shakespeare Festival Theater may need $2 million to do so.

As compared to the $30 million that Governor Rowland dedicated to the restoration of Waterbury’s Palace Theater in 1999, these comparative price tags would appear to be bargains. After all, if our government leaders were willing to spend $11 million on a public fountain in downtown New London, why not invest far smaller amounts in historic theaters to bring live performances back to the stages of our local towns?

Contributed by Michael Kraten, PhD, CPA, Accounting Professor at Providence College and President of Enterprise Mgt. Corp. http://aqpq.org

Governors Journal ended 2011 by naming its picks for “governor of the year.”

The “Governor of the Year” honor went to Wisconsin Governor Scott Walker (R).

Walker just edged out New York Governor Andrew Cuomo (D), who took the first runner-up crown.

And squeaking in with the honorable mention this year in the race for “Governor of the Year”?

Our very own Governor Dannel Malloy.

Governors Journal presents an interesting take on a governor who’s had quite an interesting inaugural year.

Here’s looking at you, 2012! We wish you and yours a happy new year -  and hope for the best for the state of Connecticut in the coming year!

When the 2012 legislative session kicks off in February, Senator Gary LeBeau of East Hartford plans to really put those questions to the test, reprising a proposal he brought to the table four years ago to eliminate either the House of Representatives or the Senate – or, in a new proposal, reduce the size of both.

Four years ago, when LeBeau first brought up his idea, he proposed one chamber with approximately 60 members.

This year, according to the Connecticut Mirror, Connecticut is budgeted to spend $65.3 million on the House, Senate, and support services.

It’s an interesting concept, particularly when paired with the results of a report released earlier this month from the nonpartisan Office of Legislative Research.

According to the report, the 2010 U.S. Census puts Connecticut’s population at 3,574,097; California, in contrast, sits at 37,253,956. Connecticut has 187 legislators; California has 120.

Because state legislative district maps were re-written following the 2010 Census and will remain in effect for a decade, LeBeau’s plan (if passed) would not take effect until 2021.

What do you think? Would a smaller legislature be better for Connecticut – or stretch resources too far?

P.S. Happy, happy holidays to you and your families – here’s to a wonderful 2012!